UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[Mark One]

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2023

OR 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to      

Commission File Number 01-13697

 __________________________________________

MOHAWK INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Delaware			52-1604305
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
160 S. Industrial Blvd.	Calhoun	Georgia	30701
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (706) 629-7721

Former name, former address and former fiscal year, if changed since last report:

__________________________________________ 

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, $.01 par value	MHK	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x

The number of shares outstanding of the issuer’s common stock as of July 26, 2023, the latest practicable date, is as follows: 63,682,156 shares of common stock, $.01 par value.

MOHAWK INDUSTRIES, INC.

INDEX

		Page No
Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of July 1, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Operations for the three and six months ended July 1, 2023 and July 2, 2022	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended July 1, 2023 and July 2, 2022	5
	Condensed Consolidated Statements of Cash Flows for the six months ended July 1, 2023 and July 2, 2022	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	37
Item 6.	Exhibits	38

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) 

(In thousands, except per share data)	July 1, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	570,933	509,623
Short-term investments	—		158,000
Receivables, net	2,087,071		1,904,786
Inventories	2,618,711		2,793,765
Prepaid expenses	552,162		498,222
Other current assets	22,451		30,703
Total current assets	5,851,328		5,895,099
Property, plant and equipment	10,136,971		9,647,779
Less: accumulated depreciation	5,179,746		4,986,601
Property, plant and equipment, net	4,957,225		4,661,178
Right of use operating lease assets	400,419		387,816
Goodwill	2,031,034		1,927,759
Tradenames	708,243		668,328
Other intangible assets subject to amortization, net	179,686		189,620
Deferred income taxes and other non-current assets	457,228		390,632
Total assets	$	14,585,163	14,120,432

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt	$	1,038,032	840,571
Accounts payable and accrued expenses	2,143,807		2,124,448
Current operating lease liabilities	106,102		105,266
Total current liabilities	3,287,941		3,070,285
Deferred income taxes	405,159		444,660
Long-term debt, less current portion	2,013,327		1,978,563
Non-current operating lease liabilities	310,612		296,136
Other long-term liabilities	356,104		312,874
Total liabilities	6,373,143		6,102,518
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $.01 par value; 60 shares authorized; no shares issued	—		—
Common stock, $.01 par value; 150,000 shares authorized; 71,018 and 70,875 shares issued and outstanding in 2023 and 2022, respectively	710		709
Additional paid-in capital	1,937,320		1,930,789
Retained earnings	7,591,215		7,409,760
Accumulated other comprehensive loss	(1,107,742)		(1,114,258)
Less: treasury stock at cost; 7,338 and 7,341 shares in 2023 and 2022, respectively	215,397		215,491
Total Mohawk Industries, Inc. stockholders’ equity	8,206,106		8,011,509
Nonredeemable noncontrolling interests	5,914		6,405
Total stockholders’ equity	8,212,020		8,017,914
Total liabilities and stockholders’ equity	$	14,585,163	14,120,432

See accompanying notes to the Condensed Consolidated Financial Statements.

3

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended			Six Months Ended
(In thousands, except per share data)	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022
Net sales	$	2,950,428	3,153,188	5,756,651	6,168,851
Cost of sales	2,218,519		2,279,991	4,381,300	4,493,526
Gross profit	731,909		873,197	1,375,351	1,675,325
Selling, general and administrative expenses	578,863		505,270	1,096,515	986,597
Operating income	153,046		367,927	278,836	688,728
Interest expense	22,857		12,059	39,994	23,540
Other (income) expense, net	2,215		(2,818)	1,649	(380)
Earnings before income taxes	127,974		358,686	237,193	665,568
Income tax expense	26,760		78,176	55,703	139,624
Net earnings including noncontrolling interests	101,214		280,510	181,490	525,944
Less: net earnings (loss) attributable to noncontrolling interests	(3)		79	35	184
Net earnings attributable to Mohawk Industries, Inc.	$	101,217	280,431	181,455	525,760
Basic earnings per share attributable to Mohawk Industries, Inc.	$	1.59	4.41	2.85	8.20
Weighted-average common shares outstanding—basic	63,680		63,540	63,630	64,116
Diluted earnings per share attributable to Mohawk Industries, Inc.	$	1.58	4.40	2.84	8.17
Weighted-average common shares outstanding—diluted	63,900		63,798	63,864	64,374

See accompanying notes to the Condensed Consolidated Financial Statements.

4

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended			Six Months Ended
(In thousands)	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022
Net earnings including noncontrolling interests	$	101,214	280,510	181,490	525,944
Other comprehensive income (loss):
Foreign currency translation adjustments	(221)		34,065	6,651	(48,382)
Prior pension and post-retirement benefit service cost and actuarial gain (loss), net of tax	(12)		70	(508)	607
Other comprehensive income (loss)	(233)		34,135	6,143	(47,775)
Comprehensive income	100,981		314,645	187,633	478,169
Less: comprehensive income (loss) attributable to noncontrolling interests	(319)		613	(338)	455
Comprehensive income attributable to Mohawk Industries, Inc.	$	101,300	314,032	187,971	477,714

See accompanying notes to the Condensed Consolidated Financial Statements.

5

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

	Six Months Ended
(In thousands)	July 1, 2023		July 2, 2022
Cash flows from operating activities:
Net earnings including noncontrolling interests	$	181,490	525,944
Adjustments to reconcile net earnings to net cash provided by operating activities:
Restructuring	33,425		1,387
Depreciation and amortization	326,542		282,984
Deferred income taxes	(59,483)		(1,377)
Loss on disposal of property, plant and equipment	421		2,444
Stock-based compensation expense	10,383		11,309
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables, net	(93,103)		(317,984)
Inventories	208,774		(434,686)
Accounts payable and accrued expenses	(84,044)		176,074
Other assets and prepaid expenses	(19,527)		(48,068)
Other liabilities	15,995		4,634
Net cash provided by operating activities	520,873		202,661
Cash flows from investing activities:
Additions to property, plant and equipment	(245,146)		(280,041)
Acquisitions, net of cash acquired	(515,405)		951
Purchases of short-term investments	(775,000)		(1,763,000)
Redemption of short-term investments	933,000		1,821,000
Net cash used in investing activities	(602,551)		(221,090)
Cash flows from financing activities:
Payments on Senior Credit Facilities	(827,829)		—
Proceeds from Senior Credit Facilities	827,734		—
Payments on commercial paper	(11,827,648)		(6,686,737)
Proceeds from commercial paper	12,013,370		6,964,700
Net payments of other financing activities	(30,567)		(14,263)
Purchase of Mohawk common stock	—		(307,188)
Change in outstanding checks in excess of cash	1,190		640
Net cash provided by (used in) financing activities	156,250		(42,848)
Effect of exchange rate changes on cash and cash equivalents	(13,262)		16,368
Net change in cash and cash equivalents	61,310		(44,909)
Cash and cash equivalents, beginning of period	509,623		268,895
Cash and cash equivalents, end of period	$	570,933	223,986

See accompanying notes to the Condensed Consolidated Financial Statements.

6

MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

1. General

Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Mohawk,” or “the Company” as used in this Form 10-Q refer to Mohawk Industries, Inc.

Interim Reporting

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with instructions to Form 10-Q and do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto, and the Company’s description of critical accounting policies, included in the Company’s 2022 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. Results for interim periods are not necessarily indicative of the results for the year.

2. Acquisitions

2023 Acquisitions

During the first quarter of 2023, the Company completed the acquisitions of two ceramic tile businesses in Brazil and Mexico within Global Ceramic for $516,893. The Company’s acquisitions resulted in a goodwill allocation of $84,367. A portion of the goodwill is expected to be deductible for tax purposes. The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisitions. These benefits include opportunities to improve the Company's ceramic performance by leveraging best practices, operational expertise, product innovation and manufacturing assets across the segment. The following table presents the preliminary allocation of the purchase price by major class of assets acquired and liabilities assumed as of the acquisition date.

	Amounts recognized as of the acquisition date
Working capital	$	98,034
Property, plant and equipment	336,360
Tradenames	38,539
Customer relationships	2,010
Goodwill	84,367
Long-term debt, including current portion	(26,072)
Deferred tax, net	(9,084)
	524,154
Less: cash acquired	(7,261)
Net consideration transferred (net of cash acquired)	$	516,893

The purchase price allocation is preliminary until the Company obtains information necessary to finalize its valuation of the fair value of net assets acquired during the measurement period. The supplemental pro forma information is immaterial to the Company's financial statements.

7

2022 Acquisitions

During the third and fourth quarters of 2022, the Company completed two acquisitions in Flooring North America (“Flooring NA”) for $164,475. The Company’s acquisitions resulted in a goodwill allocation of $60,738 and intangible assets subject to amortization of $19,900. Approximately half of the goodwill is deductible for tax purposes. During the third and fourth quarters of 2022, the Company also completed three acquisitions in Flooring Rest of the World (“Flooring ROW”) for $47,964, which resulted in a goodwill allocation of $14,759 and intangible assets subject to amortization of $3,376. An immaterial amount of goodwill is deductible for tax purposes.

3. Revenue from Contracts with Customers

Contract Liabilities

The Company records contract liabilities when it receives payment prior to fulfilling a performance obligation. Contract liabilities related to revenues are recorded in accounts payable and accrued expenses on the accompanying Condensed Consolidated Balance Sheets. The Company had contract liabilities of $70,931 and $72,572 as of July 1, 2023 and December 31, 2022, respectively.

Performance Obligations

Substantially all of the Company’s revenue is recognized at a point in time when the product is either shipped or received from the Company’s facilities and control of the product is transferred to the customer. Accordingly, the Company does not recognize a significant amount of revenue from performance obligations satisfied, or partially satisfied, in prior periods, and the amount of such revenue recognized during the three and six months ended July 1, 2023 and July 2, 2022 was immaterial.

Costs to Obtain a Contract

The Company incurs certain incremental costs to obtain revenue contracts. These costs relate to marketing display structures and are capitalized when the amortization period is greater than one year, with the amount recorded in other assets on the accompanying Condensed Consolidated Balance Sheets. Capitalized costs to obtain contracts were $69,201 and $59,015 as of July 1, 2023 and December 31, 2022, respectively. Straight-line amortization expense recognized during the six months ended July 1, 2023 and July 2, 2022 related to these capitalized costs were $27,479 and $24,876, respectively.

8

Revenue Disaggregation

In the second quarter of 2023, we updated the geographical markets for our disaggregated revenue. We added Latin America and combined Russia into Europe to more closely align with our current business. We have reflected this change in all historical periods presented. The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the three months ended July 1, 2023 and July 2, 2022:

July 1, 2023	Global Ceramic		Flooring NA	Flooring ROW	Total
Geographical Markets
United States	$	611,602	973,528	2,268	1,587,398
Europe	297,301		71	611,288	908,660
Latin America	197,990		737	8,238	206,965
Other	48,469		27,362	171,574	247,405
Total	$	1,155,362	1,001,698	793,368	2,950,428
Product Categories
Ceramic & Stone	$	1,145,234	9,883	—	1,155,117
Carpet & Resilient	10,128		791,269	235,423	1,036,820
Laminate & Wood	—		200,546	253,760	454,306
Other (1)	—		—	304,185	304,185
Total	$	1,155,362	1,001,698	793,368	2,950,428

July 2, 2022	Global Ceramic		Flooring NA	Flooring ROW	Total
Geographical Markets
United States	$	625,613	1,061,276	4,232	1,691,121
Europe	359,844		1,721	682,802	1,044,367
Latin America	125,003		830	7,769	133,602
Other	48,109		35,711	200,278	284,098
Total	$	1,158,569	1,099,538	895,081	3,153,188
Product Categories
Ceramic & Stone	$	1,153,143	10,055	—	1,163,198
Carpet & Resilient	5,426		862,033	244,700	1,112,159
Laminate & Wood	—		227,450	304,159	531,609
Other (1)	—		—	346,222	346,222
Total	$	1,158,569	1,099,538	895,081	3,153,188

(1) Other includes roofing elements, insulation boards, chipboards and IP contracts.

The following table presents the Company’s segment revenues disaggregated by the geographical market location of customer sales and product categories for the six months ended July 1, 2023 and July 2, 2022:

9

July 1, 2023	Global Ceramic		Flooring NA	Flooring ROW	Total
Geographical Markets
United States	$	1,208,244	1,899,336	3,501	3,111,081
Europe	570,770		292	1,242,886	1,813,948
Latin America	342,331		1,566	14,575	358,472
Other	93,351		53,921	325,878	473,150
Total	$	2,214,696	1,955,115	1,586,840	5,756,651
Product Categories
Ceramic & Stone	$	2,195,358	18,500	—	2,213,858
Carpet & Resilient	19,338		1,541,775	317,038	1,878,151
Laminate & Wood	—		394,840	646,834	1,041,674
Other (1)	—		—	622,968	622,968
Total	$	2,214,696	1,955,115	1,586,840	5,756,651

July 2, 2022	Global Ceramic		Flooring NA	Flooring ROW	Total
Geographical Markets
United States	$	1,210,844	2,097,156	7,018	3,315,018
Europe	671,598		3,876	1,359,900	2,035,374
Latin America	245,255		2,158	15,324	262,737
Other	95,629		68,258	391,835	555,722
Total	$	2,223,326	2,171,448	1,774,077	6,168,851
Product Categories
Ceramic & Stone	$	2,212,854	19,043	—	2,231,897
Carpet & Resilient	10,472		1,705,115	488,828	2,204,415
Laminate & Wood	—		447,290	601,296	1,048,586
Other (1)	—		—	683,953	683,953
Total	$	2,223,326	2,171,448	1,774,077	6,168,851

(1) Other includes roofing elements, insulation boards, chipboards and IP contracts.

4. Restructuring, Acquisition and Integration-Related Costs

The Company incurs costs in connection with acquiring, integrating and restructuring acquisitions and in connection with its global cost-reduction/productivity initiatives. For example:

•In connection with acquisition activity, the Company typically incurs costs associated with executing the transactions, integrating the acquired operations (which may include expenditures for consulting and the integration of systems and processes), and restructuring the combined company (which may include charges related to employees, assets and activities that will not continue in the combined company); and

•In connection with the Company’s cost-reduction/productivity initiatives, it typically incurs costs and charges associated with site closings and other facility rationalization actions, including accelerated depreciation (“Asset write-downs”) and workforce reductions.

Restructuring, acquisition transaction and integration-related costs consisted of the following during the three and six months ended July 1, 2023 and July 2, 2022:

10

	Three Months Ended			Six Months Ended
	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022
Cost of sales
Restructuring costs	$	29,576	403	58,620	1,301
Acquisition integration-related costs	865		309	877	349
Restructuring and acquisition integration-related costs	$	30,441	712	59,497	1,650
Selling, general and administrative expenses
Restructuring costs	$	5,606	86	5,803	86
Acquisition transaction-related costs	929		330	1,304	1,027
Acquisition integration-related costs	4,685		770	7,181	1,054
Restructuring, acquisition transaction and integration-related costs	$	11,220	1,186	14,288	2,167

The restructuring activity for the three months ended July 1, 2023 is as follows:

	Lease impairments		Asset write- downs and gains on disposals	Severance	Other restructuring costs	Total
Balance as of April 1, 2023	$	—	—	8,057	—	8,057
Restructuring costs
Global Ceramic	255		2,133	5,683	43	8,114
Flooring NA	—		6,620	1,503	10,366	18,489
Flooring ROW	—		7,786	—	793	8,579
Total restructuring costs	255		16,539	7,186	11,202	35,182
Cash payments	—		—	(3,574)	(7,072)	(10,646)
Non-cash items	(255)		(16,539)	71	(4,130)	(20,853)
Balances as of July 1, 2023	$	—	—	11,740	—	11,740
Restructuring costs recorded in:
Cost of sales	$	—	16,416	3,014	10,146	29,576
Selling, general and administrative expenses	255		123	4,172	1,056	5,606
Total restructuring costs	$	255	16,539	7,186	11,202	35,182

    

11

The restructuring activity for the six months ended July 1, 2023 is as follows:

	Lease impairments		Asset write- downs and gains on disposals	Severance	Other restructuring costs	Total
Balances as of December 31, 2022	$	—	—	10,037	—	10,037
Restructuring costs
Global Ceramic	255		2,133	5,683	43	8,114
Flooring NA	—		6,106	1,553	17,743	25,402
Flooring ROW	—		29,752	1	1,154	30,907
Total restructuring costs	255		37,991	7,237	18,940	64,423
Cash payments	—		—	(5,585)	(14,124)	(19,709)
Non-cash items	(255)		(37,991)	51	(4,816)	(43,011)
Balances as of July 1, 2023	$	—	—	11,740	—	11,740
Restructuring costs recorded in:
Cost of sales	$	—	37,868	3,064	17,688	58,620
Selling, general and administrative expenses	255		123	4,173	1,252	5,803
Total restructuring costs	$	255	37,991	7,237	18,940	64,423

The Company expects the remaining severance and other restructuring costs to be paid over the next 12 months.

5. Fair Value

The Company’s wholly-owned captive insurance company may invest in the Company’s commercial paper. These short-term commercial paper investments are classified as trading securities and carried at fair value based upon the Level 2 fair value hierarchy.

Items Measured at Fair Value

	July 1, 2023		December 31, 2022
Short-term investments:
Commercial paper (Level 2)	$	—	158,000

The fair values and carrying values of the Company’s debt are disclosed in Note 18, Debt.

6. Receivables, net

	July 1, 2023		December 31, 2022
Customers, trade	$	1,970,737	1,699,130
Income tax receivable	24,693		60,080
Other	168,920		219,355
Less: allowance for discounts, claims and doubtful accounts	77,279		73,779
Receivables, net	$	2,087,071	1,904,786

12

7. Inventories

	July 1, 2023		December 31, 2022
Finished goods	$	1,837,940	1,986,005
Work in process	160,488		160,757
Raw materials	620,283		647,003
Total inventories	$	2,618,711	2,793,765

8. Goodwill and Intangible Assets

Goodwill:

	Global Ceramic		Flooring NA	Flooring ROW	Total
Balance as of December 31, 2022 (1)	$	339,834	591,985	995,940	1,927,759
Goodwill adjustments related to acquisitions	—		(1,145)	3,217	2,072
Goodwill recognized during the period	84,367		—	—	84,367
Currency translation during the period	1,228		—	15,608	16,836
Balance as of July 1, 2023(1)	$	425,429	590,840	1,014,765	2,031,034

(1) Net of accumulated impairment losses of $2,015,939 ($1,220,444 in Global Ceramic, $343,054 in Flooring NA and $452,441 in Flooring ROW).

Intangible assets not subject to amortization:    

	Tradenames
Balance as of December 31, 2022	$	668,328
Intangible assets acquired during the period	38,539
Currency translation during the period	1,376
Balance as of July 1, 2023	$	708,243

Intangible assets subject to amortization:

	Customer relationships		Patents	Other	Total
Balance as of December 31, 2022
Gross carrying amount	$	673,586	242,089	8,511	924,186
Accumulated amortization	(493,361)		(239,010)	(2,195)	(734,566)
Net intangible assets subject to amortization	180,225		3,079	6,316	189,620
Balance as of July 1, 2023
Gross carrying amount	683,755		246,820	8,718	939,293
Accumulated amortization	(513,210)		(243,998)	(2,399)	(759,607)
Net intangible assets subject to amortization	$	170,545	2,822	6,319	179,686

	Three Months Ended			Six Months Ended
	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022
Amortization expense	$	7,053	6,826	14,222	13,999

13

9. Accounts Payable and Accrued Expenses

	July 1, 2023		December 31, 2022
Outstanding checks in excess of cash	$	3,986	2,791
Accounts payable, trade	1,184,104		1,094,038
Accrued expenses	645,185		742,099
Product warranties	43,065		38,425
Accrued interest	5,130		8,748
Accrued compensation and benefits	262,337		238,347
Total accounts payable and accrued expenses	$	2,143,807	2,124,448

10. Accumulated Other Comprehensive Income (Loss)

	Foreign currency translation adjustments		Prior pension and post- retirement benefit service  cost and actuarial gain (loss)	Total
Balance as of December 31, 2022	$	(1,114,629)	371	(1,114,258)
Current period other comprehensive income (loss)	7,024		(508)	6,516
Balance as of July 1, 2023	$	(1,107,605)	(137)	(1,107,742)

11. Stock-Based Compensation

The Company recognizes compensation expense for all share-based payments granted based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10. Compensation expense is recognized on a straight-line basis over the awards’ estimated lives for fixed awards with ratable vesting provisions.

The Company granted 30 restricted stock units (“RSUs”) at a weighted average grant-date fair value of $94.86 per unit for the three months ended July 1, 2023. The Company granted 261 restricted stock units (“RSUs”) at a weighted average grant-date fair value of $102.09 per unit for the six months ended July 1, 2023. The Company granted no RSUs for the three months ended July 2, 2022. The Company granted 189 RSUs at a weighted average grant-date fair value of $137.99 per unit for the six months ended July 2, 2022. The Company recognized stock-based compensation expense related to the issuance of RSUs of $5,351 ($3,959 net of taxes) and $5,655 ($4,184 net of taxes) for the three months ended July 1, 2023 and July 2, 2022, respectively, which has been allocated to cost of sales and selling, general and administrative expenses. The Company recognized stock-based compensation costs related to the issuance of RSUs of $10,383 ($7,684 net of taxes) and $11,309 ($8,369 net of taxes) for the six months ended July 1, 2023 and July 2, 2022, respectively, which has been allocated to cost of sales and selling, general and administrative expenses. Pre-tax unrecognized compensation expense for unvested RSUs granted to employees, net of estimated forfeitures, was $29,024 as of July 1, 2023, and will be recognized as expense over a weighted-average period of approximately 1.93 years.

12. Other (Income) Expense, net

	Three Months Ended			Six Months Ended
	July 1, 2023		July 2, 2022	July 1, 2023	July 2, 2022
Foreign currency (gains) losses, net	$	6,832	(292)	11,786	444
Release of indemnification asset	—		—	—	7,324
All other, net	(4,617)		(2,526)	(10,137)	(8,148)
Total other (income) expense, net	$	2,215	(2,818)	1,649	(380)

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13. Income Taxes

For the three months ended July 1, 2023, the Company recorded income tax expense of $26,760 on earnings before income taxes of $127,974 for an effective tax rate of 20.9%. For the three months ended July 2, 2022, the Company recorded income tax expense of $78,176 on earnings before income taxes of $358,686, for an effective tax rate of 21.8%. The decrease in the effective tax rate was primarily driven by lower earnings before income taxes and the Company’s geographic dispersion of profits and losses for the respective periods, partially offset by an increase in unrecognized tax benefits in the three months ended July 1, 2023.

For the six months ended July 1, 2023, the Company recorded income tax expense of $55,703 on earnings before income taxes of $237,193 for an effective tax rate of 23.5%, as compared to income tax expense of $139,624 on earnings before income taxes of $665,568, for an effective tax rate of 21.0% for the six months ended July 2, 2022. The increase in the effective tax rate was primarily driven by an increase in unrecognized tax benefits in the six months ended July 1, 2023, and an Italian benefit associated with the release of an uncertain tax liability in the six months ended July 2, 2022, partially offset by lower earnings before income taxes and the Company’s geographic dispersion of profits and losses for the respective periods.

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14. Stockholders’ Equity

The following tables reflect the changes in stockholders’ equity for the three months ended July 1, 2023 and July 2, 2022 (in thousands).

	Total Stockholders’ Equity
	Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock		Nonredeemable Noncontrolling Interests	Total Stockholders’ Equity
	Shares	Amount				Shares	Amount
Balance as of April 1, 2023	71,017	$710	$1,931,987	$7,489,998	($1,107,825)	(7,338)	($215,397)	$6,233	$8,105,706
Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards	1	—	(17)	—	—	—	—	—	(17)
Stock-based compensation expense	—	—	5,350	—	—	—	—	—	5,350
Net earnings attributable to noncontrolling interests	—	—	—	—	—	—	—	(3)	(3)
Currency translation adjustment on noncontrolling interests	—	—	—	—	—	—	—	(316)	(316)
Currency translation adjustment	—	—	—	—	95	—	—	—	95
Prior pension and post-retirement benefit service cost and actuarial loss	—	—	—	—	(12)	—	—	—	(12)
Net earnings	—	—	—	101,217	—	—	—	—	101,217
Balances as of July 1, 2023	71,018	$710	$1,937,320	$7,591,215	($1,107,742)	(7,338)	($215,397)	$5,914	$8,212,020

	Total Stockholders’ Equity
	Common Stock		Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock		Nonredeemable Noncontrolling Interests	Total Stockholders’ Equity
	Shares	Amount				Shares	Amount
Balances as of April 2, 2022	70,880	$709	$1,913,518	$7,630,837	($1,048,599)	(7,341)	($215,495)	$6,633	$8,287,603
Shares issued under employee and director stock plans, net of shares withheld to pay taxes on employees’ equity awards	2	—	(2)	—	—	—	4	—	2
Stock-based compensation expense	—	—	5,654	—	—	—	—	—	5,654
Repurchases of common stock	(4)	—	—	(611)	—	—	—	—	(611)
Net earnings attributable to noncontrolling interests	—	—	—	—	—	—	—	79	79
Currency translation adjustment on noncontrolling interests	—	—	—	—	—	—	—	535	535
Purchase of noncontrolling interest, net of taxes	—	—	572	—	—	—